Buying or selling real estate is a big deal, and often a stressful endeavor for most folks. And these days, the stakes have gotten higher. For the last few years, real estate wire fraud has become a huge problem for home buyers, sellers, title companies and real estate agents. If you’re buying or selling a home soon, you need to know about this common and costly form of fraud and what you can do to protect yourself from it.
What Is Real Estate Wire Fraud?
Real estate wire fraud is when a cyber-criminal gains access to details in a real estate transaction – contact information for buyers and sellers, closing time, transaction amount – and uses those details to trick a buyer into wiring their down payment or entire purchase amount into a fraudulent wire account, controlled by criminals.
How Common is Real Estate Wire Fraud?
Real estate wire fraud is an enormous problem, and it’s on the rise. In 2017, nearly $1 billion in real estate funds were either stolen or attempted to be stolen by cyber thieves. It’s the fastest growing real estate crime in the U.S., up 500 percent from last year alone.
Here are just a few notable real estate wire fraud cases from 2017:
- Hackers stole $1.5 million from a Washington D.C. couple trying to buy their dream home
- A New York Supreme Court judge lost $1 million trying to buy a new apartment
- Retired Illinois couple lost their entire retirement savings of $300,000 when trying to purchase a new home in suburban Chicago
- A real-estate analyst lost $73,000 trying to buy his first home in Phoenix
How Does Real Estate Wire Fraud Happen?
Although cyber criminals have many ways of perpetrating fraud, real estate wire fraud often happens like this: a fraudster gains access to the email account of a real estate agent or title agent. They then lie in wait, reading and watching emails for signs of a transaction about to take place and gather details about the transactions – who is the buyer or seller, how much is the closing amount, when is the closing, etc. Then the cyber thief uses either the actual agent’s email, or creates a spoofed email address and contacts the buyer (something like email@example.com vs. firstname.lastname@example.org) to send them wire instructions for their downpayment. Often these wire instructions come at the last minute, even through a phone call, where the buyer is notified that details have changed and could they please wire the money to a different account, preferably as soon as possible. The buyer, under the stress of buying a new house, follows instructions and unknowingly hands thousands, if not millions, of dollars into the hands of thieves.
Where does the money go? Can they get it back?
Often, wire fraud schemes are perpetrated by international mob rings. Those criminal networks have people working for them in the United States, and use those folks to send the details for the fraudulent account. As soon as the money is wired, that person wires it again, often abroad, where it might be subsequently wired to several other accounts, making it harder to track.
Sometimes, folks are able to get their money back, but only if they work quickly and diligently. If notified soon enough, the FBI can initiate a wire fraud kill chain, keeping the money from being transferred. But sometimes buyers are kept in the dark about where their money went, like this Colorado couple who lost their entire life-savings of $272,000 when they were victims of wire fraud and the bank and title company did not notify them of what happened.
How Can I Avoid Real Estate Wire Fraud?
Real estate wire fraud is extremely tough to catch, so as a buyer or seller, you need to be extremely careful. The first step to avoiding the problem would be to interview prospective real estate agents and title companies and ask them if they’re aware of the problem and what they’re doing to combat it. You want to hear that they’ve beefed up their email and network security and put policies in place – like always confirming wire instructions over the phone or only communicating with buyers and sellers from pre-determined phone numbers or email addresses – to address the problem. Most of all, you want someone that takes the problem seriously and doesn’t brush off your concerns. That’s a sure sign of folks who are not prepared and are likely targets of a hack.
If you’re already in the midst of a real estate transaction, make sure you call your real estate agent to confirm any financial details. Avoid sending sensitive information over email, and put the numbers of your real estate agent and title agent into your phone so you’ll know if a call comes from a different number, claiming to be them. Never use a public wifi network, like at a cafe or library, to access your bank account or send sensitive documents or information. Although most real estate closings use wire transfers these days, you can also insist on using a cashiers check to avoid wire fraud.
After wiring any money, call to confirm that it was received by the correct people. If it wasn’t, and there’s any confusion about what happened, contact the FBI right away and inform your bank of possible fraud. Here’s a more exhaustive list of what to do if you think you’ve been the victim of real estate wire fraud.
Another way to avoid fraud yourself is to educate yourself about phishing – a common email theft scheme – and make sure you have strong, unique passwords on all your accounts. With so many data breaches happening every day, it’s important to check if your password has been compromised. Consider using a master password app or software like LastPass to manage your passwords and protect your accounts.
Real estate wire fraud is a serious and growing problem. Protect yourself, and share this information with people you know, especially those who are buying and selling property, so that they can be on the lookout for thieves trying to steal their hard-earned cash.